Elder Advocates of Alberta Society v Alberta, 2011 ABQB 801

Court of Queen ’ s Bench of Alberta Citation: Elder Advocates of Alberta Society v Alberta, 2011 ABQB 801 Date: 20111219 Docket: 0503 13196 Registry: Edmonton Between: Elder Advocates of Alberta Society and James O. Darwish, Personal Representative of the Estate of Johanna H. Darwish, deceased Plaintiffs - and - Her Majesty the Queen In Right of Alberta and Alberta Health Services Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.J. Greckol _______________________________________________________ I.

Introduction [ 1 ] On May 12, 2011, the Supreme Court of Canada rendered a decision in this action, striking the Plaintiffs ’ negligence and bad faith claims against the Defendant, the Province of Alberta (Alberta).

The Defendant, Alberta Health Services (AHS) was not party to the appeal, but now applies under ss 9(4) and 11(1) of the Class Proceedings Act , SA 2003, c-16 .5 ( CPA ) to amend the Certification Order by deleting the claims of negligence and bad faith against AHS. [ 2 ] The Plaintiffs, Elder Advocates Of Alberta Society and James Darwish (collectively EAAS), take the position that the decision of the Alberta Court of Appeal regarding the claims in question remains undisturbed and is binding.

Further, since there are no new facts or law which justify re-litigating those issues, they contend the application of the AHC amounts to an abuse of process.

II. Background [ 3 ] EAAS claims that residents of Alberta long-term care facilities (LTCFs) have been overcharged since August 2003. By letter dated August 1, 2003, the Minister of Seniors and Community Supports directed the Regional Health Authorities (RHAs) to charge the maximum Accommodation Charge. EAAS alleges, inter alia , that Class members were charged, under the guise of Accommodation Charges, for health care costs which were the legal responsibility of Alberta. EAAS initially sued Alberta and nine RHAs.

AHS is the successor to the nine former RHAs. [ 4 ] The original Statement of Claim seeking recovery of monies from AHS and Alberta included allegations of breach of fiduciary duty, negligence, breach of contract and unjust enrichment. On August 14, 2008, this Court certified some causes of action and declined to certify others including breach of fiduciary duty ( 2008 ABQB 490 , 453 AR 1 ). [ 5 ] Appeals by both AHS and Alberta were dismissed by the Alberta Court of Appeal on December 4, 2009.

The Court allowed the cross-appeal of EAAS and certified the claim for breach of fiduciary duty against Alberta, but not against AHS ( 2009 ABCA 403 , 469 AR 270 ). [ 6 ] Alberta appealed to the Supreme Court of Canada which struck out the fiduciary, negligence and bad faith claims against Alberta ( 2011 SCC 24 , [2011] 2 SCR 261 ). III. Positions of the Parties A.

The Position of AHS [ 7 ] AHS submits that the CPA authorizes applications to amend certification orders at any stage of the proceedings, and empowers the Court to amend its earlier orders through decertification where it is no longer satisfied as to the existence of the five certification criteria. There is nothing in the CPA to suggest that the Court cannot amend or decertify a claim based solely on a change in, or clarification of, the law. [ 8 ] AHS relies on Pearson v Inco Ltd , 42 CELR (3d) 310 , 2009 CarswellOnt 1000 at para 26 (Sup Ct

J) and Smith v Inco Ltd , 2009 CarswellOnt 8019 at paras 29-35 (Sup Ct

J) in support of its argument that decertification can occur at any time. [ 9 ] AHS cites McKinnon v National Money Mart Limited , 2009 BCCA 103 as an example of a case where issue estoppel prevented the defendant from taking advantage of a change in the law to obtain a stay.

AHS asserts that issue estoppel is not applicable in a motion to amend a certification order to decertify, since the CPA clearly indicates that certification orders are not final and provides a procedure to revisit them. [ 10 ] With respect to the claims in negligence and bad faith, AHS submits that the reasoning of the Supreme Court applies equally to AHS. Neither the pleas nor the facts warrant any distinction as between Defendants regarding the alleged duty of care. B. The Position of EAAS [ 11 ] EAAS argues that the Court of Appeal has confirmed its right to pursue certain causes of action.

AHS did not appeal that decision to the Supreme Court, and therefore the Alberta Court of Appeal decision as it relates to AHS is binding. Further, re-litigation of

those issues in the form of an application to amend the Certification Order is barred by issue estoppel and would constitute an abuse of process. [ 12 ] EAAS submits that the statutory obligations of AHS are distinct from those of Alberta: there are many mandatory duties to audit, supervise, monitor and administer the funds related to the Accommodation Charges paid by the Class members (ss 13(2) and (4), 14(1) and (2) of the Regional Health Authorities Act , RSA 2000, c R-10; s 19 of the Nursing Homes Act , RSA 2000, c N-7; s 25 of the Hospitals Act , RSA 2000, c H-12).

Further, there is evidence that: - Alberta has issued requests or demands for information and reports from AHS; - the reports and statements prepared by AHS include information regarding monies received from Class members for the Accommodation Charges and monies received from Alberta; and - Alberta has imposed additional mandatory reporting obligations on AHS (Standards 1.23(a), 1.24(

b) of the Continuing Care Health Service Standards ). [ 13 ] EAAS argues that these statutory duties are vastly different from the statutory duties imposed on Alberta. The duty of AHS to audit, monitor, supervise and administer the Accommodation Charges must of necessity relate to the Class members because it is their money.

These duties are imposed to protect the Class members from abuse. [ 14 ] Aside from the difference in statutory duties, the proximity factors applicable to AHS differ from those applicable to Alberta: the Class members (all of whom have chronic disabilities) are in the full time care of AHS or its agents and not Alberta, the Class members are charged the Accommodation Charges by AHS or its agents and not by Alberta, and they pay it to AHS, not to Alberta. [ 15 ] Finally, the fear of virtually unlimited exposure of the government to private claims does not apply to AHS, because AHS owes a duty only to those persons who pay Accommodation Charges.

IV. Legislation [ 16 ] The CPA provides in part: 1 In this Act, (a) “ certification order ” means an order certifying a proceeding as a class proceeding... ... (g) “ decertification order ” means an order under which a class proceeding is decertified from being a class proceeding... ... 5(1) In order for a proceeding to be certified as a class proceeding on an application made under

section 2 or 3, the Court must be satisfied as to each of the following: (

a) the pleadings disclose a cause of action... ...

10 If the Court refuses to certify a proceeding as a class proceeding, the Court may permit the proceeding to continue as one or more proceedings between different parties and, for that purpose, the Court may do one or more of the following: (

a) order the addition, deletion or substitution of parties; (

b) order the amendment of the pleadings; (

c) make any other order, not referred to in clause (

a) or (b), that the Court considers appropriate. 11(1) ...if at any time after a certification order is made under this Part the Court, with respect to the class proceeding, determines that it is no longer satisfied as to the matters referred to in

section 5..., the Court may do one or more of the following: (

a) amend the certification order; (

b) decertify the proceeding...

(2) If the Court makes an order under subsection (1) decertifying a proceeding as a class proceeding, the Court may (

a) permit the proceeding to continue as one or more proceedings between different parties, and (

b) make any order referred to in

section 10 in relation to each of those proceedings. ... 36(1) Any party may, without leave, appeal to the Court of Appeal from any of the following: ...(

b) an order decertifying a proceeding... V. Analysis [ 17 ] On Alberta ’ s appeal, the Supreme Court determined that a class proceeding remains the preferable procedure, even if the claims are reduced to those alleging unjust enrichment and discrimination under s 15(1) of the Charter . Therefore, what is at issue here is not decertification, but the potential amendment of pleadings so as to exclude causes of action. [ 18 ]

Section 11 of the CPA indicates that the Court has jurisdiction under the CPA to amend a certification order at any time where the Court is no longer satisfied that at least one of the s 5 criteria is met, including the requirement that the pleadings disclose a cause of action. This must logically include situations where the law has changed since certification so as to render one or more of the claims no longer viable. [ 19 ] It is true that this Court is bound by decisions of both the Alberta Court of Appeal and the Supreme Court of Canada, and it is ultimately the decision of the Supreme Court that is binding.

However, AHS was not a party to the appeal to the Supreme Court in this case. Therefore, the more difficult question is whether the decision of the Supreme Court implicitly overruled that of the Court of Appeal with respect to its conclusions on the viability of certain

causes of action against AHS. If so, then the viability of those claims may be put in issue, and this Court is entitled to reconsider s 5(

a) in light of the decision of the Supreme Court to determine whether to amend the certification order, with due regard to the principles of issue estoppel and res judicata . [ 20 ] It must be kept in mind, however, that the requirement under s 5(

a) that pleadings disclose a cause of action is a very low standard. The claim must be “ doomed to fail ” : Windsor v Canadian Pacific Railway Ltd , 2007 ABCA 294 , 417 AR 200 at para 35 ; it must be plain and obvious that the claim cannot succeed: Hollick v Toronto (City) , 2001 SCC 68 , [2001] 3 SCR 158 at para 25 .

Therefore, if there is a doubt as to the effect of the decision of the Supreme Court on the relevant causes of action against AHS, EAAS should not be deprived of the opportunity to advance them. [ 21 ] In order to determine the effect of the decision of the Supreme Court of Canada, it is helpful to undertake a brief review of the relevant aspects of the decisions at all three court levels. A.

Court of Queen ’ s Bench ( 2008 ABQB 490 , 453 AR 1 ) [ 22 ] At the initial Certification Hearing, this Court considered relevant claims against Alberta (or the Minister) and the RHAs (now AHS) which can be summarized as follows: - Alberta had a duty of care to ensure that the Accommodation Charge was fair, reasonable, justifiable and reflected the cost of accommodation and meals. - the RHAs owed a duty of care to exercise reasonable care, skill and diligence to ensure the Accommodation Charge was fair, just, reasonable and reflective of the cost of accommodation and meals. - Alberta breached its duty by increasing the Accommodation Charge without any basis for defining accommodation cost components or a method of calculation, without a basis for raising it, and without a basis for separating health care costs and the Accommodation Charge. - the RHAs breached their duty in failing to conduct any analysis to determine the cost of accommodation and meals in their regions before levying, either directly or through their agents, the maximum Accommodation Charge throughout the province in circumstances where they were of the view that there was substantial regional disparity with respect to those costs. - Alberta breached its duty by intending, expecting and instructing LTCF operators to charge the maximum Accommodation Charge and by directing the RHAs and their agents to use money received from the Accommodation Charge to pay for health care services which were Alberta's responsibility. - the Minister recklessly and in bad faith increased the Accommodation Charge without ensuring that there was a correlation between that increase and the actual cost of accommodation and meals. - Alberta acted in bad faith in directing operators of LTCFs to charge the maximum Accommodation Charge. - Alberta owed and breached a duty of care in auditing, supervising, monitoring and administering the health care benefits paid by Alberta to the RHAs, the health care benefits paid by the RHAs to LTCFs and the money paid for the Accommodation Charge to ensure the cost of health care services would be paid by the Defendants and not members of the Proposed Class, money paid for the Accommodation Charge would be used solely for accommodation and meals and the right of members of the Proposed Class to publicly funded health care services was protected.

- the RHAs owed and breached a duty of care in auditing, supervising, monitoring and administering the health care benefits paid byAlberta to the RHAs, the health care benefits paid by the RHAs to LTCFs and the money paid for the Accommodation Charge to ensurethe cost of health care services would be paid by the Defendants and not members of the Proposed Class, money paid for theAccommodation Charge would be used solely for accommodation and meals and the right of members of the Proposed Class to publiclyfunded health care services was protected. [23] I noted that pursuant to s 24(

g) of the Nursing Homes Act, the Minister was authorized to make regulations respecting thedetermination of Accommodation Charges. The Minister set maximum Accommodation Charges by regulation and, again by regulation,increased those Charges. I held that it was plain and obvious that the legislative scheme does not support a private law duty of care on thepart of the Minister in setting maximum Accommodation Charges. Further, the Minister's directive to operators involved financial oreconomic factors or constraints and therefore must be construed as policy rather than an operational decision.

I held that the onlyavailable ground of attack would be that it was an arbitrary exercise of discretion, one that was undertaken recklessly or in bad faith.

Ifurther held that this would not be the basis for a claim in damages, but rather for an administrative law remedy. [24] EAAS also alleged that the Defendants owed the members of the Proposed Class a duty of care in auditing, supervising,monitoring and administering the health care benefits paid by Alberta to the RHAs, the health care benefits paid by the RHAs to LTCFsand the money paid for the Accommodation Charges in order to ensure that the Accommodation Charges would be used solely foraccommodation and meals.

I held that it was arguable that such activities could be classified as operational, and it was foreseeable on thepart of the Defendants that negligence in carrying out their duties in regard to those activities might cause loss or damage to members ofthe Proposed Class. [25] I also found it to be arguable that the Defendants and members of the Plaintiff Class were in sufficient proximity such that aduty of care with respect to operational decisions or activities would arise, given the vulnerability of the members of the Proposed Classand their reliance on Alberta and the RHAs to ensure they were honouring not only their service but also their payment obligations.Finally, I held that if the decisions relating to auditing, supervising, monitoring and administering the health care benefits are policydecisions, they could be attacked as having been undertaken in bad faith.

B. Court of Appeal (2009 ABCA 403, 469 AR 270) [26] The Court of Appeal held that it was arguable that this case was analogous to Brewer Brothers v Canada (AttorneyGeneral), (FCA), [1992] 1 FC 25, [1991] FCJ No 456 (CA) in terms of liability relating to operational decisionsassociated with the auditing, supervision and monitoring of the health care benefits and Accommodation Charges.

The Court reasonedthat even if it was not arguable that this case falls within an established category, it was arguably foreseeable on the part of Alberta andthe RHAs that negligence in carrying out their duties in regard to the auditing, supervision and monitoring of the health care benefits andthe Accommodation Charges might cause loss or damage to members of the proposed class. [27] The Court found it to be arguable that the parties were in sufficient proximity such that a duty of care with respect tooperational decisions would arise, given the vulnerability of the respondents as well as their reliance on Alberta and RHAs to ensure theywere honouring their service and payment obligations.

Finally, it held that even policy decisions are not entirely immune from judicialscrutiny and a duty of care can be imposed where there exists a bad faith exercise of discretion. [28] The Court upheld my determination that the directions regarding the Accommodation Charges do not fall within theoperational realm. It overturned my determination that the claim of bad faith can only give rise to an administrative law remedy, statingthat a claimant may be entitled to make a claim for damages where a policy decision is undertaken in bad faith. C.

Supreme Court of Canada (2011 SCC 24, [2011] 2 SCR 261) [29] McLachlin J. for the Court summarized the negligence allegation against Alberta as being that statutory and regulatory dutiesbrought Alberta into a relationship of proximity with members of the class, whom it was reasonably foreseeable would be affected byfailure to discharge these duties in a non-negligent manner.

In reviewing the regime in question and Alberta’s role in it, McLachlin J.noted among other things that the RHAs received block funding from Alberta to deliver health care services, and were responsible formanaging the provision of health services under the Regional Health Authorities Act. LTCFs were regulated by the Nursing Homes Act

and received funding from Alberta by way of the RHAs and the LTCF residents. LTCFs were run by private operators or the RHAs, not by Alberta. [ 30 ] McLachlin J. found that the legislative scheme does not impose a duty on Alberta to act in relation to the Class members with respect to the Accommodation Charges, as EAAS failed to point to any duty on Alberta in the relevant statutory provisions to audit, supervise, monitor or administer the funds related to the Accommodation Charges.

The Nursing Homes Act , Regional Health Authorities Act , Hospitals Act and their regulations impose no positive duty on Alberta, but grant only permissive monitoring powers. [ 31 ] McLachlin J. also addressed the allegation that Alberta ’ s conduct brought it into a relationship of proximity due to the fact that Alberta supervised, monitored and administered the Accommodation Charges, and directed the RHAs to charge the class members the maximum Accommodation Charges without regard to the actual cost of accommodation and meals, and the RHAs communicated information about the rates directly to the class members at the direction of Alberta.

She held that in the absence of a statutory duty, the fact that Alberta may have audited, supervised, monitored and generally administered the Accommodation Charges does not create sufficient proximity to impose a prima facie duty of care. The conduct of Alberta relied upon by EAAS was insufficient to establish a relationship of proximity between Alberta and the claimants. [ 32 ] McLachlin J. found at para 72 that the specific acts alleged (that Alberta directed the charges and that the RHAs communicated them to members of the claimant class) fall under the administration of the scheme.

She held that the mere supplying of a service is insufficient, without more, to establish the requisite relationship of proximity. Noting that the law does not recognize a stand-alone action for bad faith, she found the allegation of bad faith as pleaded to be bootstrapped to the duty of care, and therefore it fell with the negligence claim. [ 33 ] McLachlin J. stated that if the pleadings had satisfied the first step of the Anns/Cooper test, they would fail at the second step, which asks whether the prima facie duty of care is negated by policy considerations: 74...

It is arguable that to impose a duty of care on the plaintiff class on the facts pleaded would open the door to a claim in negligence by any patient in the health care system with an entitlement to receive funding for health services, whether primary or extended. This raises the spectre of unlimited liability to an unlimited class... [ 34 ] Finally, McLachlin J. noted at the outset that an action remains pending against the RHAs and that the relief sought related only to Alberta.

At the end of the decision, in striking the pleas of breach of fiduciary duty, negligence and bad faith against Alberta, she added: 102 ...Without endorsing them, I would leave untouched...any other pleas which survived in the lower courts and were not appealed to this Court... [ 35 ] In the Fresh Statement of Claim No. 3, EAAS claims that AHS owed Class members a duty to exercise all reasonable care, skill and diligence with respect to auditing, supervising, monitoring and administering health care benefits provided by AHS to LTCFs and the Accommodation Charges paid by the Class members in order to establish a reasonable nexus between the Accommodation Charges and the cost of accommodation and meals (para 39). [ 36 ] With respect to the Minister ’ s letters, EAAS claims that as a result of the negligent conduct of AHS and the ultra vires , deliberate and unlawful conduct of the Crown Ministers, agents, servants and employees in fixing and directing imposition of the maximum Accommodation Charges, the Class members suffered damage and loss (at para 50). [ 37 ] McLachlin J. expressly stated that she left untouched any other pleas which survived in the lower courts and were not appealed to the Supreme Court.

In the face of this statement, it is difficult to conclude that the Supreme Court implicitly overruled the decision of the Court of Appeal regarding the viability of the negligence and bad faith claims against AHS.

[ 38 ] McLachlin J. did make one finding which is directly relevant to AHS: Alberta ’ s act of directing the Charges and the RHA ’ s act of communicating them to members of the class fall under the administration of the scheme.

However, as I read the current version of the claim, the alleged negligence of AHS is now limited to its failure to determine a reasonable nexus between the Accommodation Charges and the cost of accommodation and meals, although it possessed the data upon which such a determination could be made. [ 39 ] EAAS points out that in contrast to the duties on Alberta, the statutory regime does impose certain reporting obligations on AHS, such as to have an auditor, to forward audited reports to the Minister ( RHAA , ss 13(2), 13(4)), to respond to requests of the Minister, and to provide an annual report containing audited information including financial statements (ss 14(1) and 14(2)).

AHS is also required under Standard 1.23(

a) of the Continuing Care Health Service Standards to collect and submit data in accordance with reporting requirements, and under Standard 1.24(

b) to provide an annual report summarizing their compliance status with the continuing care health service standards and relevant legislation. [ 40 ] With respect to proximity, EAAS notes that the class members are all in the full time care of AHS or its agents, and not Alberta, and the Accommodation Charges are charged and received by AHS.

McLachlin J., in reviewing the regime, distinguished Alberta ’ s role from that of the other players, noting that the RHAs received block funding from Alberta to deliver health care services, and were responsible for managing the provision of health services under the Regional Health Authorities Act . LTCFs received funding through the RHAs and the LTCF residents, and were run by private operators or the RHAs, not by Alberta. [ 41 ] I note that s 5(a)(

v) and (

b) of the Regional Health Authorities Act mandates that AHS, among other things, promote the provision of health services in a manner that is responsive to the needs of individuals and communities, and that it has final authority in respect of such matters. The Class members are in the full time care of AHS or its agents. It is AHS which collects Accommodation Charges and through which funding from Alberta flows.

It is AHS which is in a position to determine costs, allocate resources and provide relevant information to the Minister. [ 42 ] AHS notes that any statutory reporting obligations on AHS flow up to the Minister, and not down to class members. Further, at least some of those duties are only triggered by the Minister exercising his or her discretion to require a report. The arguments of AHS on these points merit serious consideration given the comments of the Supreme Court in relation to Alberta.

However, it is possible that AHS ’ unique position in the regime may affect that analysis. [ 43 ] AHS also argues that the Supreme Court found that any prima facie duty of care would be negated by policy considerations, in particular the floodgates argument. McLachlin J. made this comment after determining that the relevant pleadings against Alberta did not satisfy the first step of the Anns/Cooper test.

While these obiter comments may be persuasive, they are made along with the express observation that the decision applies only to claims against Alberta and that the Court declined to pronounce on all other pleas, leaving them untouched. [ 44 ] As noted above, the requirement under s 5(

a) that pleadings disclose a cause of action is a very low standard. In my view, for the reasons stated above it cannot be said that the decision of the Supreme Court in this matter implicitly overruled that of the Alberta Court of Appeal to the effect that the negligence and bad faith claims against AHS are arguable. I remain bound by the decision of the Alberta Court of Appeal insofar as it relates to the remaining negligence and bad faith claim against AHS. V.

Conclusion [ 45 ] Despite the able arguments of counsel for AHS, the circumstances do not compel the conclusion that the pleadings concerning negligence and bad faith against AHS as currently framed are inappropriate for certification. VI. Costs [ 46 ] The Plaintiffs/Respondents are entitled to their costs.

Heard on the 4 th day November, 2011. Dated at the City of Edmonton, Alberta this 16 th day of December, 2011. S.J. Greckol J.C.Q.B.A. Appearances: Allan A. Garber J.K. McFadyen Parlee McLaws LLP for the Plaintiffs P. Jonathan Faulds Field LLP for Alberta Health Services